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Stocks Slide Further As $700 Billion Bailout Debated

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The Associated Press

Published: September 24, 2008

NEW YORK - Financial markets extended their declines Tuesday, with the Dow falling more than 150 points, as investors worried that lawmakers were beginning to doubt the necessity of a broad government bailout for financial institutions as a way to revive ailing credit markets.

Meanwhile crude oil prices fell back Tuesday after the previous session's wild, record-setting rally, dropping below $107 a barrel as uncertainty over the financial bailout plan and a stronger dollar led investors to shed commodities.

It was crude's first down session in five days. Some decline was to be expected after crude soared 16 percent Monday - the biggest one-day gain ever - partly because of a technical fluke.

Still, oil market watchers say crude is showing early signs that it may be poised for another big climb. They say tightening global supplies, weakness in the dollar and nervousness about the U.S. government's $700 billion financial rescue plan could soon prompt edgy investors to shift funds out of equities and send a burst of capital back into safe-haven commodities such as oil - potentially pushing prices back toward record levels and causing consumers more pain at the pump.

Top economic officials updating Congress about efforts to work out a $700 billion financial rescue plan faced a greater degree of second-guessing from lawmakers than some investors had expected.

The Dow fell 161.52, or 1.47 percent, to 10,854.17 after having risen more than 125 points in the early going and then falling by more than 180. With Monday's 370-point decline, the blue chips are down 534 points, or 4.69 percent, for the week.

Still, stock trading appeared more orderly than Monday, when investors rushed into hard assets such as oil and gold. Meanwhile, demand remained high for 3-month Treasury bills, considered the safest short-term financial asset, while the dollar regained some ground after being hard hit Monday.

After days of intense gyrations in financial markets, investors are anxious over whether the plan to absorb bad mortgages and other risky assets will help steer the economy onto more solid footing.

"There's skepticism about whether the $700 billion number is the right number," said Jim Herrick, manager and director of equity trading at Baird & Co.

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